Kontron AG sizing up double-digit growth again in 2004

Sales of EUR 229.2 million and operating result of EUR 10.2 million exceed forecasts for the 2003 business year / Strong fourth quarter: EUR 65.6 million sales, EUR 3.8 million EBIT and a record of EUR 100.5 million on the order book / Double digit sales growth and exceptional performance gains of 70 percent planned in 2004 / Strong growth impulses emanating from the United States and the emerging markets

Eching (near Munich), March 23, 2004. In the 2003 business year, TecDAX listed Kontron AG exceeded sales and operating result forecasts. Total revenue was recorded at EUR 229.2 million (previous year: EUR 215 million; including JUMPtec consolidated as of July 3, 2002). As of December 31, 2003 orders at hand moved up to EUR 100.5 million (previous year: EUR 94 million), representing a record level in spite of the considerable depreciation of the dollar over the euro. Kontron invoices 50 percent of its orders in US dollars. Adjusted by these currency fluctuations (in 2003, the US dollar depreciated by around 20 % over the year 2002), growth in orders at hand weighs in at 15 percent. Thanks to Kontron’s global operations (location hedging) and other financial instruments, currency effects have impacted performance to a marginal degree. The worldwide leader – according to company statements – in the embedded computer sys­tems sector succeeded in posting operating earnings of EUR 10.2 million (EBIT before extraordinary goodwill amortization) that are six times higher than the previous year’s figures (EUR 1.6 million). At the beginning of the 2003 business year, Kontron had been anticipated sales of just over EUR 220 million and an operating result of EUR 7 million.

In the 2003 business year surplus for the period came in at EUR 5.1 million by comparison with EUR 0.7 million in the previous year (also before extraordinary goodwill amortization). The 2003 net result of Kontron AG (minus EUR 28.6 million) contains the one-off, goodwill amortization of EUR 34.7 million in the second quarter that did not affect income. In this way, Kontron is adjusting the book goodwill that arose due to balance sheet considerations as a result of the merger with JUMPtec. The merger of both companies was evaluated as sale according to US-GAAP and JUMPtec was consolidated on the Kontron balance sheet as the cut-off date July 3, 2002.

Solid finance and asset position

In the 2003 business year the finance and asset position of Kontron AG developed satisfactorily. As of December 31, 2003 the liquid funds position amounted to EUR 64.5 million (previous year: EUR 47.2 million). Together with various credit lines, the Kontron Group’s liquidity stood at over EUR 90 million. Operating cash flow was at EUR 15.8 million, equaling a cash flow yield of 6.9 %. Given a balance sheet total of EUR 281 million (previous year: EUR 304 million) the equity ratio is 66.3 percent (previous year: 72.9 percent). At the end of 2003 Kontron was employing a workforce of 1,687 members of staff, which is an increase of 200 over the previous year (1,487 employees). With a total of 588 engineers in the company’s service, that is twice the figure in 2001 and equals more than one third of the company’s employees, Kontron occupies an absolute leading position in the ECT market and plays a pioneering role.

Record figures in Q4, 2003

As the company announced on the occasion of the balance sheet press conference in Munich, the fourth quarter of 2003 showed the company developing "with record figures." Sales of EUR 65.6 million were 20 percent above the previous quarter (EUR 54.4 million). By comparison with the fourth quarter of the 2002 business year (EUR 63.7 million), growth of 12 percent was achieved after currency adjustments. As of December 31, 2003 it was not only the orders at hand that had topped the 100 million euro mark, thereby coming in at a record level. Given a total of 52 "design wins" the nu

mber and volume of development orders reached a new peak figure in the fourth quarter. Kontron refers to a customer project as a design win, when sales of more than 1 million euros are anticipated.

Earnings strength improved once again in the fourth quarter, marking the fifth quarter in succession. Operating income (EBIT) came in at EUR 3.8 million over EUR 2.8 million in the third quarter and a minus of EUR 0.1 million in the same period last year.

Strong impulses emanating from the United States and the emerging markets

In the 2003 business year and especially in the fourth quarter there were strong growth impulses emanating from the United States. "In America we have been posting growth over the past six quarters – stated in US dollars this amounts to more than 30 percent all in all. At the same time we have succeeded in advancing EBIT margins to around 8 percent," explained CEO Hannes Niederhauser. In the emerging markets, especially in Russia, China and Far Eastern nations Kontron was able to almost double sales over the previous year to a total of US $ 36 million. In the ongoing business year, an increase to US $ 50 million is being targeted.
Indicators and impulses for renewed vigorous growth in 2004

The Kontron Group anticipates a market boost in growth in the business year 2004. As Hannes Niederhauser outlines: "In the 2002 and especially in the 2003 business years we have created the foundations to be well equipped and positioned for further, profitable growth when an upswing in the global markets sets in. The Group commands an efficient organization, healthy liquidity, solid earnings strength as well as the leading technology position within the branch." Thanks to the consistent orientation towards enhancing value creation and the timely focus on the high-growth geographical markets of the future the key steps have already been taken. "The improved general conditions on the world markets in connection with the innovative power and the sales strength of the Kontron Group, in connection with various current positive indicators for 2004 point to positive business developments in 2004. We are anticipating sustained, double-digit growth and a disproportionately strong gain in performance (EBIT) of 70 percent," as Mr. Niederhauser stated. Continuing, the CEO explained that the company may, in the foreseeable future, also be once again targeting moderate "external growth" in what is still a very fragmented market.

Hans Mühlbauer joins the Supervisory Board

After the integration of JUMPtec and the successful build up of the business in Asia, Mr. Hans Mühlbauer will leave the Management Board as of March 31, 2004. In future, he intends to support the strategy of Kontron as a member of the Supervisory Board. The Supervisory Board will suggest Mr. Hans Mühlbauer for this position on the next General Shareholders Meeting. The Kontron AG Management Board now consists of Hannes Niederhauser (Chairman), Ulrich Gehrmann and Thomas Sparrvik.